You gotta look at the big picture here. It's much bigger than just Knowles' defensive schemes.
1) This shows Penn State's commitment institutionally to moving from a Top 10 program to a Top 5 program. The playoff run showed the money people that it is within reach. Yeah it's $3 mil a year but that's a relatively small price to pay for the signal this sends to potential recruits about where PSU wants to go. If there was a question about whether PSU was satisfied as a top 10 program, that question has been answered -- clearly no.
2) D-coordinator is more than calling plays, it's leadership of the entire defensive program starting with recruiting. Knowles' success was built on talent and development -- but he had a lot to do with that talent coming to tOSU, winning at tOSU and then flowing seamlessly into the NFL. This means PSU is going to compete better for the kinds of players who go to Ohio State.
3) Larry Johnson Sr. is retiring at some point. Heck if Day doesn't make him DC, he might leave over that. It means PSU and Deion Barnes are positioned to reallly challenge Ohio State to be the leading defensive line program in the Big Ten. And anybody will tell you D-line is the foundation of the best defenses in college football.
4) I don't think Knowles would be coming, even though the money is ridiculous, if he didn't hear a commitment by PSU donors and PSU athletics to have a top tier NIL program. If all those pieces are in place, PSU will be able to take its recruiting up a notch.
5) Good timing for this in the larger scheme of college football. Alabama is in transition, and it's not clear where SEC leadership will be -- so PSU can compete for recruits from SEC country. Michigan is in transition -- I am still not sure Sherrone Moore is going to be the long term answer as Michigan HC. Ohio State will still be Ohio State obviously and that is the big dog PSU is chasing. Oregon also will be a formidible competitor but for recruits who want to stay East and in the national spotlight, PSU is a more attractive destination today than it was yesterday.